Oscar Wilde once wrote,
"Between the optimist and the pessimist, the difference is droll. The optimist sees the doughnut; the pessimist the hole!"
The Monitor’s humorist, Dexter van Dango, grapples with these opposing forces in the following article. Luckily, and for those who know Dexter, predictably, the forces of optimism prevail.
Optimism, pessimism and attitude in general have influence on how you look at the world around you. Most days I wake up as a very positive person. Possessing what I admit to be a rather “anal” personality, I follow a routine that includes a short period of meditation during which I deliberately choose to see the positive angle of daily life. Some days that doesn’t work and I turn into Chicken Little.
Every day while at home, in our communities, or at work — whether watching television, reading newspapers, tweeting or blogging — we are surrounded by folks who choose to see things as optimists or as pessimists. I emphasize — it is a choice!
Perhaps the best way to demonstrate this is to give you, the reader, the opportunity to see my outlook from both perspectives. First as Dexter the pessimist, aka: Chicken Little — the sky is falling, woe is me! Then as Dexter the optimist — the master of his own universe. Both perspectives are real and both represent the way I really feel when I choose to be one or the other. I suspect that you will recognize some of your own views in each perspective.
Dexter the Pessimist
I have been stymied. And it is reasonable to think that you have been too. Most business leaders in commercial finance and leasing have been put in the unenviable position of having their authority usurped while remaining fully burdened with all of their responsibilities. Blame it on the credit crunch, the financial crisis and the great recession. It’s a no-win situation.
What do I mean by usurped authority and fully burdened responsibility? I mean that the rules have all changed and there seem to be a lot more rules today than there were just a few years ago. And of course, breaking or stretching the rules will no longer be tolerated.
A few issues back I wrote about the new reality — a total recalibration of the business as we know it. Sir Isaac Newton theorized that, “For every action there is always opposed an equal reaction.” My theory was that the irrational exuberance we experienced during the middle of this decade was followed by an equally irrational pessimism, cynicism and distrust as the pendulum swung to the opposite side.
About now you should be wondering what this has to do with authority and responsibility. Early in my career, I was taught that one takes responsibility before one is granted authority. In today’s situation, we have had our authority taken away because the pendulum failed to swing back to center. Hence, the credit gods flexed their muscles and instituted more stringent parameters. The credit box got tighter, so tight that nearly nothing flows through it without pressure and pain.
What about exceptions? They don’t exist. Too much leverage, declined. Thirty-four months in business — less than our three-year minimum requirement, declined. The list goes on and on and on. In the past I could navigate my way around these delicate, on the cusp transactions. Frequently, I had the authority to influence the outcomes. Not anymore. Discouragingly, today my colleagues and I are collectively viewed as a bunch of sales jockeys trying to ride bad deals over the finish line. Authority, influence and, at times, even my credibility are gone!
My team brings good deals to the table and they get shot down because the new reality has made it tougher to do business in the current environment. Stricter credit parameters coupled with more stringent approval conditions equals less business volume. You would expect that the powers that be would come to understand this equation and therefore manage expectations up the line. Wrong! I’m still being charged with growing the business, improving profits, all while containing risk.
The mood of pessimism, cynicism and distrust remains firmly in place. Banks aren’t lending. Small business confidence is down and inventories are declining. According to the quarterly member survey of the Business Roundtable, an association of chief executives of large companies, “CEOs are demonstrating some caution in the area of capital expenditures, with fewer planning to increase spending and more keeping it level.” Make no mistake — these are not good signs of economic recovery. You may call me the Prophet of Doom, but I am concerned!
Dexter the Optimist
This year, my business is lagging in nearly all of our key performance indicators. We’re soft on volume and profits while we’re getting hit with an increase in non-performing assets and charge-offs. Spreads are up year-over-year so we’re ahead of plan in that area. The strong spreads make up for some of the soft volume and reduced profits. After speaking to several industry colleagues, I’ve learned that many of them are suffering through similar results.
Last year, The American Recovery and Reinvestment Act of 2009 had its intended effect on the economy. It stemmed job losses and stimulated growth — figuratively, it righted the ship. But the fix is too little and taking too long. I can’t wait for a bolstered economy to aid my business performance. Instead, I am compelled to take actions now that will contribute to the improvement of my short- and long-term performance.
Our sales funnel is stressed. We put more and more into the top yet it seems that less and less comes through the bottom. I need to refine the way we target customers and redirect my sales force to focus on only those clients that are most likely to fit our credit box. If done correctly, I expect we can do more with less. Using our Customer Relationship Management tools, we can target a broad base of prospects that meet our minimum thresholds. Our sales team can start working the phones to set appointments to visit with interested prospects. It’s a numbers game so I need to hold each of them accountable for a set number of calls per day. You can’t manage what you don’t measure.
As another growth strategy, we have decided to comb through our portfolio to identify transactions that were written with low spreads, but with yields that are higher than what we could offer today. After developing the list, we will contact each client with an offer to refinance their existing lease or loan at a lower rate. If we can increase the spreads and extend the term on the new transactions, we will increase our average assets, maintain or increase portfolio spread and improve our overall profitability.
We need to closely monitor the expense side of our business. We’re cutting back on travel and entertainment, but not at the risk of losing customers. The smarter approach is to limit the number of attendees we send to business meetings, conferences and external training. Cutting costs can sometimes send the wrong message to our people. I’ve clearly communicated to the entire organization why we need to manage expenses and that I need everyone to chip in. We really want to avoid cutting headcount, though we are monitoring performance and making sure that we’re not carrying any dead weight.
With open and honest communication, attention to detail and close monitoring of expenses we can manage the controllable areas of our business. With a refined prospecting model and an opportunistic portfolio mining approach, I believe we can mend our volume deficit. With these proactive measures, I know we will weather this storm and have a stronger business in the future.
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